The Chairman reported that he had accepted two
items of urgent business which required consideration prior to the
next Committee. The first related to the Draft Strategic Risk
Register (Minute 25 refers.) and the second was a report on
Accounting Policies used in the Preparation of the Statement of
Accounts (Minute 24 refers.).

24.

Item of Urgent Business - Accounting Policies used in the Preparation of the Statement of Accounts

Minutes:

In accordance with
S100B (4) of the Local Government Act 1972, the Chairman requested
that the Committee give consideration to an item of urgent business
regarding a report on Accounting Policies used in the Preparation
of the Statement of Accounts. The Chairman had accepted this as an
item of urgent business as approval of the accounting policies was
required prior to the next meeting of the
Committee.

The Deputy Section
151 Officer presented the report.

It was reported that
accountancy policies were the specific principals, conventions,
rules and practices applied by the Council in preparing and
presenting its financial statements. The Statement should contain
only policies that were relevant to the circumstances of the
Council and which addressed material transactions. They should be
subject to annual review and agreement by those charged with
governance.

The Committee was advised that The Chartered Institute of Public
Finance and Accountancy (CIPFA) Code of Practice on Local Authority
Accounting (the Code) had adopted International Financial Reporting
Standard (IFRS) 15 – 'Revenue from contracts with customers'
and IFRS 9 – 'Financial instruments' with effect from
2018/19. The Council’s accounting policies had therefore been
amended to reflect these changes to the Code and also the
materiality of its transactions.

A copy of the
amended accounting policies was attached as Appendix 1 to the
report.

Members asked
questions regarding the changes and the impact of changes to the
policies and were advised that they were mainly technical changes
which would have limited impact.

It was proposed by Councillor Colin Hartley and
seconded by Councillor Oliver Robinson:

“That the recommendation set out in the report
be approved.”

Upon being put to
the vote, Members voted unanimously in favour of the proposition,
whereupon the Chairman declared the proposal to be
carried.

Resolved:

That the accounting
policies, as set out in Appendix 1 of the report, incorporating the
identified changes, be approved.

25.

Item of Urgent Business - Draft Strategic Risk Register

Minutes:

In accordance with
S100B (4) of the Local Government Act 1972, the Chairman requested
that the Committee give consideration to an item of urgent business
regarding a report on the Draft Strategic Risk Register. The
Chairman had accepted this as an item of urgent business as
consideration was required prior to the next meeting of the
Committee.

The Internal Audit
and Assurance Manager (IAAM) presented an update to Members on the
progress made in implementing a strategic risk register.

It was reported that
it in accordance with the Committee’s Terms of Reference, the
Audit Committee were responsible for monitoring the effective
development and operation of risk management in the Council and
monitoring progress in addressing risk related issues.

Members considered
the draft strategic risk register and discussed the
Committee’s role in challenging the content of the Register.
Members noted that the Risk Register was currently draft and further work was required to ensure
mitigating actions were in place against each risk. The IAAM also
made reference to the External Auditors Planning Report (minute 31
refers) where risk management had been highlighted as requiring
additional work. The IAAM informed the Committee that the
observations made in the report will be used to implement an action
plan to assist the Council strengthen risk management across the
organisation.

Resolved:

That the draft
strategic risk register be noted.

26.

Declarations of Interest

To receive declarations by Members of interests in
respect of items on this Agenda.

Members are reminded that, in accordance with the
Localism Act 2011, they are required to declare any disclosable
pecuniary interests which have not already been declared in the
Council’s Register of Interests. (It is a criminal offence
not to declare a disclosable pecuniary interest either in the
Register or at the meeting).

Whilst not a legal requirement, in accordance with
Council Procedure Rule 9 and in the interests of clarity and
transparency, Members should declare any disclosable pecuniary
interests which they have already declared in the Register, at this
point in the meeting.

In accordance with Part B Section 2 of the Code Of
Conduct, Members are required to declare the existence and nature
of any other interests as defined in paragraphs 8(1) or 9(2) of the
Code of Conduct.

The Committee
received the report of the IAAM which sought a revision to the
Terms of Reference (TOR) for the Audit Committee.

It was reported that in March
2018, CIPFA had re-issued their practical guidance for Audit
Committees and provided Local Authorities with a suggested TOR
setting out the purpose and the core functions required.

Members
were advised that since its last review in February 2018, whilst no
further responsibilities had been assigned to the Committee, a
significant number of changes had been made to the TOR to ensure
that it accurately reflected the work of the Committee and that it
took into consideration the suggested TOR recommended by CIPFA. In
particular, the requirement for the TOR to have a ‘statement
of purpose’ which included the Committees core
purpose.

A copy of the amended TOR was
attached as Appendix A to the report for consideration.

The IAAM informed the Committee
that as is was the last meeting in the municipal year and that
May’s Election could see a different membership at its next
meeting, she did not intend going through the TOR in any detail.
However, full training on the TOR would be given once the new
Committee had been appointed.

The Committee were advised that
the Constitutional Working Group had suggested an amendment to the
Composition paragraph of the TOR. The Group agreed to incorporate
this amendment and for the revised TOR to be referred to the
Constitutional Working Group for inclusion in the revised
Constitution for approval at full Council.

The External Auditor also
advised the Committee that the TOR should include a term requiring
the Committee to satisfy themselves of the independence of the
External Auditor.

It was proposed by
Councillor Malcolm Thomas and seconded by Councillor Nick
Wilkinson:

“(1) That the proposed revision of the
Audit Committee’s TOR be accepted by the Committee along with
the following revisions;

a)That the composition of the Committee be
amended to the wording previously agreed by the Constitutional
Working Group;

“7 Councillors in political balance. Chair to
be appointed by Council annually.

The Chair and Vice Chair must not be a Member of the
Cabinet or Overview and Scrutiny.

The Committee has the right of access to all the
information it considers necessary in connection with the work of
the Committee and may consult directly with Internal and External
Auditors.”

b)Inclusion of a Term requiring the
Committee to satisfy themselves of the independence of the External
Auditors.

(2)That the revised TOR be reported to the
Constitutional Working Group for inclusion within the amended
Constitution and approval at Full Council.”

Upon being put to
the vote, Members voted unanimously in favour of the proposition,
whereupon the Chairman declared the proposal to be
carried.

Resolved:

(1)
That the proposed revision of the Audit Committee’s TOR be
accepted by the Committee and that the revised TOR be reported to
the Constitutional Working Group for inclusion within the amended
Constitution which will be approved at Full
Council.

The IAAM presented a report which sought
approval for the annual review of the Internal Audit Charter.

Members were advised that in accordance with
Internal Audit Standards, the Charter should be reviewed
periodically. The last review was carried out on the 21 February
2018.

It was reported that only a few minor
changes were needed to take into consideration that following a
recent organisational restructure, ‘Management Team’
was now the ‘Executive Team’ and the IAAM now reported
directly to the Council’s Section 151 Officer following the
departure of the Council’s Chief Officer
(Resources).

Members asked a number of questions relating to the Internal
Audit Charter and agreed that the periodic review of the Charter
should continue to take place annually.

It was proposed by
Councillor Colin Hartley and seconded by Councillor Oliver
Robinson:

“That the
recommendation set out in the report be approved.”

Upon being put to
the vote, Members voted unanimously in favour of the proposition,
whereupon the Chairman declared the proposal to be
carried.

Resolved:

That the Internal Audit
Charter, submitted at Appendix A to the report be
approved.

The IAAM presented a
report which sought the Committee’s approval for the proposed
Internal Audit Strategy and Annual Risk Based Plan for
2019/20.

It was reported that
the Internal Audit Strategy was a high-level statement of how the
Internal Audit Service would be delivered and developed in
accordance with its internal Audit Charter and how it linked to the
Council’s organisational objectives and
priorities.

A copy of the Audit
Plan for 2019/20 was attached as Appendix B to the report. Members
were advised that the audit plan looked different from previous
years due to the removal of allocated days. The IAAM explained that
this was to keep the audit plan flexible, recognising the imminent
changes the council faces over the next 12 months but also
acknowledging the reduced resources within the team.

It was
reported thatfollowing the resignation of
the Deputy IAAM in December 2018, and subject to Audit Committee
approval, temporary arrangements had been provisionally made with
Lancashire County Council to provide up to 50 audit days to assist
in the delivery of the 2019/20 Audit Plan.

It was also reported
that whilst the contract with Wyre Council for the post of the IAAM
was due to cease on the 31 August 2019, a review of the Internal
Audit Service was currently being undertaken by the Corporate
Director of Resources, which if approved, would see the
continuation of the current arrangements with Wyre
Council.

The Committee asked
a number of questions relating to the outsourcing of audit work to
Lancashire County Council and the risks in relation to this. The
Committee were advised that the risks were minimal. The Committee
also asked questions around the current capacity within the audit
team and if they were sufficient to deliver the audit plan. The
IAAM advised the Committee that this would be kept under review and
progress on implementing the plan reported to them on a regular
basis

It was proposed by
Councillor Malcolm Thomas and seconded by Councillor Oliver
Robinson:

“That the
recommendation set out in the report be approved.”

Upon being put to
the vote, Members voted unanimously in favour of the proposition,
whereupon the Chairman declared the proposal to be
carried.

Resolved:

(1)That the Internal Audit Strategy and Risk Based Plan
for 2019/20 be approved.

(2)That the Audit Committee approve the appointment of
Lancashire County Council Internal Audit Services for the delivery
of up to 50 audit days to assist with the delivery of the 2019/20
Audit Plan.

(3)That the Audit Committee note that a restructure was
currently taking place, which would explore the possibility of
extending the current arrangements with Wyre Council in relation to
the post of the IAAM.

The Deputy Section
151 Officer presented the annual report of the certification of
claims and returns work undertaken in 2017/18 by KPMG.

It was reported that
certification work had been carried out on two claims/returns to
give assuranceto funding bodies
of the accuracy and validity of the Councils
returns.

The Pooling of
Housing Subsidy Benefit was certified as unqualified without
amendment. A qualification had been necessary for the Housing
Subsidy Benefit claim. No adjustment had been made for the errors
identified.

Resolved:

That the
Certification of Claims and Returns Annual Report 2017/18 be
accepted.

The Committee received the External Audit
Planning Report for the year ending 31st March 2019
prepared by Deloitte, which outlined how Deloitte would deliver its
financial statements audit work for the Authority.

Paul Hewitson,
Director at Deloitte LLP, advised the Committee that Deloitte had
completed the handover with KPMG, and had been working with
officers to develop a plan in collaboration with the Council.

It was reported that the External Auditors had
determined a materiality of £2.9million, based on 2% or gross
and would report any misstatements above £145,000 to the
Committee. Any misstatements below this threshold would be reported
if they were considered material by their nature.

Members discussed the materiality and
reporting thresholds and agreed that these were appropriate.

Members were advised on the significant risks
which the External Audit would focus on during the Audit including
the completeness and cut off of service line expenditure, property
valuations and management override of controls as well as Value for
Money and Risk Management.

Members asked a number of questions in
relation to the External Audit Planning Report, the Risk Register
and the role of the External Auditors including their relationships
with Lancashire County Council and other close by Local
Authorities.

Resolved:

That the External Audit Planning Report for
year ending 31st March 2019 be accepted.

The
Section 151 Officer and Paul Hewitson,
Director of Deloitte LLP left the room at this point.

32.

Periodic Discussion with the Internal Audit and Assurance Manager

Discussions with the Internal Audit and
Assurance Manager.

Minutes:

Audit Committee Members were provided with an
opportunity to speak to the Internal Audit and Assurance Manager in
confidence.